Is Compliance keeping the pace with the Front Office?

The pending Point of Sale (POS3) regulatory deadline (May 2016) is keeping compliance professionals busy designing new workflows and evaluating solutions that support a shift from the Back Office to the Front Office. This is driving a major change in how compliance is managed and also the speed at which all compliance events must be completed. An added challenge is that compliance is chasing a moving target. The speed of commerce is increasing in every sector – and Wealth Management is leading the charge on many fronts. To attract younger client demographics, there is an increased emphasis on self-directed trading platforms. Injecting a compliance event into a self-directed transaction requires a just-in-time disclosure event that will not interrupt the trade. Wealth managers must ensure that this JIT disclosure event is both accurate and non-obtrusive – minimizing the risk of interrupting the transaction and causing the online event to be abandoned. The increased complexity of wealth products is also creating timing challenges for disclosure. Discretionary investing and pooled products are shrinking the disclosure window – compliant disclosure needs to occur in a very short timeframe to meet regulatory requirements. Perhaps the biggest challenge for the industry is relying on the investment advisor to complete the POS disclosure event. When you consider the thousands of advisors serving millions of clients, there will be an infinite number of case examples of how and when a disclosure event occurs – at the prospecting stage, during financial planning, immediately prior to trade, in-person, online, etc. etc. While the disclosure events in each of these scenarios must meet compliance requirements, they also must be sufficiently flexible to accommodate each unique client conversation.

The industry must keep pace with the momentum of the Front Office, considering speed and flexibility while meeting the ultimate goal of compliant disclosure. When we consider other industries that have faced this challenge, the only viable solution is technology. The winners in this race will leverage technology that is flexible in addressing an evolving Front Office, while delivering a robust, high quality document repository.